CBOE Makes Another Attempt to get ETF License from SEC

The Securities Exchange Commission (SEC) in the United States has received an application for a Bitcoin ETF license from CBOE Global Markets, which would take Bitcoin to an even greater institutional investor base for investment. The complete details of the application were made available on the SEC website to solicit comments on the proposed rule change from interested persons.

ETF details from the application

According to the application, CBOE BZX Exchange, Inc. filed a proposal to list and trade shares of SolidX Bitcoin Shares (the “Fund”) issued by the VanEck SolidX Bitcoin Trust (the “Trust”) under the under BZX Rule which oversees the listing and trading of Commodity-Based Trust Shares on the Exchange.

The other details of the application can also be found in the application which states that the Trust was formed as a Delaware statutory trust on September 15, 2016, and is functioned as a grantor trust for U.S. federal tax purposes. The Trust has no fixed expiry date. According to the Registration Statement, each Share will represent a fractional undivided beneficial interest in the Trust’s net assets and will be worth 25 bitcoins. The Trust’s assets will consist of bitcoins held by the Trust utilizing a secure process as described below in “bitcoin Security and Storage for the Trust”. The Trust will not hold cash or any other assets apart from the limited amount of cash that would be required for creation and redemption of Baskets and to pay Trust expenses.

The activities of the Trust are limited to –

1. Issuing Baskets in exchange for the cash and/or bitcoin deposited with the Cash Custodian or Trust, respectively, as consideration
2. Purchasing bitcoin from various exchanges and in OTC transactions
3. Selling bitcoin (or transferring bitcoin, at the Sponsor’s discretion, to pay the Management Fee) as necessary to cover the Sponsor’s Management Fee, bitcoin Insurance Fee, Trust principals’ and employees’ salaries, expenses associated with securing the Trust’s bitcoin and Trust expenses not assumed by the Sponsor and other liabilities
4. Selling bitcoin as necessary in connection with redemptions
5. Delivering cash and/or bitcoin in exchange for Baskets surrendered for redemption
6. Maintaining insurance coverage for the bitcoin held by the Trust and
7. Securing the bitcoin held by the Trust

The application also lists some reputed organization providing a variety of services. Following is the of companies and their roles

• SolidX Management LLC – Sponsor of the Trust (“Sponsor”).
• SolidX Partners Inc. Delaware Trust Company is the Trustee (“Trustee”)
• Bank of New York Mellon will be the administrator (“Administrator”), transfer agent (“Transfer Agent”) and the custodian with respect to cash,(“Cash Custodian”)
• Foreside Fund Services, LLC will be the marketing agent (“Marketing Agent”) in connection with the creation and redemption of “Baskets”
• Van Eck Securities Corporation (“VanEck”) provides assistance in the marketing of the Shares

The Investment objective of the trust is for the Shares to reflect the performance of the price of bitcoin, less the expenses of the Trust’s operations which it will achieve by investing in assets in the OTC markets and not in any domestic or international crypto exchange.

Related: Bitcoin ETF Up for a Revival with “VanEck SolidXBitcoin Trust” But at a Hefty Price

SEC may change stance this time

SEC had previously rejected various applications regarding ETF licensing. This is CBOE is the second attempt after their first attempt for the ETF license was rejected in March. The Winklevoss twins’ funds have also attempted to for an SEC License to form an ETF.

This is also VanEck’s third attempt to create and list a bitcoin ETF. In the majority of previous application that was rejected, the SEC had raised substantial concerns about giving a bitcoin ETF its approval, largely due to the fact that this will make this volatile, high-risk investment product much more accessible to retail investors.

This time things look a little different as each share would be of 25 bitcoins, which would be approximately USD 1,67,637 as of today, making it too expensive for retail investors. Also with changing global environment towards cryptos and “SEC recent comments on Bitcoin and Ethereum not being securities may compel SEC to change its stance this time”.    

If all goes well and according to plan CBOE may launch the Bitcoin ETF  by Q1 of 2019. This would change the complete dynamics and bring a new era in crypto investing.

Will CBOE succeed in its attempt to establish a Bitcoin ETF this time? Do let us know your views on the same.